Nevis trust tax rules and U.S. reporting

Which trusts the ordinance covers

The ordinance's income tax provision applies to an international trust registered under that ordinance. Its definition of an international trust includes requirements about a qualifying trustee, non-resident settlors and beneficiaries, and the trust property.^[1]

At least one trustee must fall within one of the listed categories. These include a Nevis-incorporated corporation, a Nevis-formed limited liability company, a licensed trust company, a licensed attorney or firm, or a registered multiform foundation. The trustee condition does not require all trustees to reside in Nevis.^[1]

The ordinance defines a non-resident natural person by domicile or ordinary residence in Saint Christopher and Nevis, and also includes certain entities. The defined entity categories include Nevis corporations and limited liability companies, as well as entities formed elsewhere that do not ordinarily engage in trade or business within the Federation.^[1]

Tax treatment under Nevis law

A trust registered under the ordinance is exempt from all income tax under the ordinance's tax provision. The same section also provides exemptions from estate, inheritance, succession and gift taxes on trust property by reason of a death, and from stamp duty for specified trust property instruments or trustee transactions.^[1]

The ordinance's provision states the income tax treatment by reference to registration under the ordinance. There is no separate income source test under the provision. Registration and qualifying conditions determine the scope of the exemption.^[1]

It states that the registered office is the office of the trustee that is a listed Nevis entity or professional, and uses that office as the address for service of documents upon the trust.^[1]

Registration and filing details

The ordinance requires an annual certificate of registration for a registered international trust. It also refers to filing an application for renewal in the prescribed form. These are registration requirements.^[1]

Separate from the trust's registration, the Inland Revenue Department describes reporting obligations under the Common Reporting Standard for entities that meet the applicable criteria as Reporting Financial Institutions. The department says financial institutions must conduct due diligence on account holders' tax residence, identify reportable accounts, and report information annually to the department.^[2]

A trust is among the legal arrangements that may be considered in determining whether an entity is a financial institution. CRS treatment depends on the listed entity, jurisdiction, financial institution, and exclusion tests. Trustee-documented trusts are among specified non-reporting institutions, so trust status alone does not establish whether reporting applies.^[2]

For an account that is reportable, the department lists information such as the account holder's name, address, tax residence and tax identification number, along with account balance and income generated. The department states that CRS returns are due annually by May 31 after the reporting period ends, and are submitted electronically through its AEOI Portal.^[2]

How U.S. reporting rules relate

The IRS describes separate U.S. income tax and information reporting consequences for U.S. persons who create a foreign trust, transact with one, are treated as its owner, or receive distributions. A U.S. citizen is included in the IRS definition of a U.S. person. Nevis registration treatment does not replace these U.S. rules.^[5][6]

The IRS says a U.S. person treated as the owner under grantor trust rules is generally taxed on the trust's income. A U.S. beneficiary receiving a distribution from a foreign non-grantor trust generally reports the beneficiary's share of distributable net income. The IRS also says Form 3520 can apply to a U.S. person who creates or transfers property to a foreign trust, receives a distribution, or is treated as its owner.^[5]

Where a U.S. person is treated as an owner under grantor trust rules, the IRS says the foreign trust must timely file Form 3520-A and provide annual statements to U.S. owners and beneficiaries. If the trust does not file, the U.S. owner files a substitute Form 3520-A attached to the owner's timely Form 3520.^[5]

The IRS also identifies Form 8938 and FinCEN Form 114 as reporting regimes that may apply in addition to Forms 3520 and 3520-A. Exceptions to Forms 3520 and 3520-A do not affect any obligation to report specified foreign financial assets on Form 8938 or other reporting requirements, including FinCEN Form 114.^[5]

Questions and answers

Related resources

Related glossary terms

• Section 679: Section 679 addresses certain transfers by U.S. persons to foreign trusts. It treats some property transfers as ownership when the trust has a U.S. beneficiary.
• Trustee: A trustee controls trust assets and manages, uses, or disposes of them for beneficiaries or a stated purpose under the trust terms and applicable law.

Related articles and guides

• Belize trust rules and U.S. reporting: Belize rules on international trust registration and agents, plus local tax treatment, sit beside IRS reporting for U.S. citizens with foreign trusts.
• Malta trust taxation and U.S. reporting: Malta summarizes trust tax treatment and administrative obligations for a trust with at least one Malta-resident trustee, and IRS forms for U.S. persons.
• Singapore trust tax rules and U.S. reporting: Singapore's rules for taxing trust income, including trustee and beneficiary shares, with the IRS reporting rules for U.S. persons connected to a trust.

Tools and official documents

• Foreign trust reporting role finder: Tick the roles that describe a connection to a foreign trust or foreign account to see the forms the IRS and FinCEN instructions discuss. Roles can overlap.

Related pages

• Nevis (Saint Kitts and Nevis): overview: Start page for this jurisdiction.
• Trust legislation
• Types of trusts
• Trustee regulation and licensing
• Reporting and information exchange